Pacquiao (58-6-2, 38 KOs) and his team will meet in Manila on August 10 to decide the venue for the bout, with Dubai and Los Angeles the likely options.

In April, after defeating Timothy Bradley, the 37-year-old Pacquiao announced his retirement from boxing to focus on his political career in the Philippines and won his senate seat in May.

Last month his promoter Bob Arum confirmed that Pacquiao would be back in the ring this year and that was confirmed by Koncz at the time.

"Retirement doesn't suit Manny right now," Koncz told the Los Angeles Times. "Boxing is in his blood. When he trains, it's like a pressure-release valve. You can see a dramatic difference in his mood… he's happy.

"It's amazing what training and fighting does for him."

The 27-year-old Vargas (27-1, 12 KOs) was last in action against countryman Sadam Ali on March 16, when he won the vacant WBO welterweight title.